US Dollar Forecast: DXY Strengthens as Treasury Yields Firm into Fed Meeting

Dollar Bulls Take Control as Markets Brace for Major Policy Signals

The U.S. Dollar Index (DXY) advanced sharply on Tuesday as buyers reclaimed the 50-day moving average at 99.197 and pushed the index closer to the 200-day moving average at 99.439. The rebound unfolded while U.S. Treasury yields inched higher and markets positioned ahead of the October JOLTS report and Wednesday’s Federal Reserve decision.

Traders continue to price in a December rate cut, keeping the dollar supported in early trading but limiting aggressive repositioning until Fed Chair Jerome Powell provides fresh guidance.

Fundamental Forces Driving the Dollar’s Rebound

Treasury yields firmed slightly, with the 10-year at 4.176% and the 2-year at 3.604%. Rising yields tend to offer support to the dollar because they raise the relative return on U.S. assets. Short-end yields also ticked higher, suggesting investors are calibrating expectations for employment data and the Fed’s near-term policy stance.

Consensus estimates place October JOLTS openings at 7.15 million. A stronger reading would typically reinforce the dollar by reducing the urgency for near-term rate cuts. Conversely, weaker labor demand could feed expectations for faster easing and pressure the index.

Markets widely expect the Federal Reserve to cut rates at the upcoming meeting. Eastspring Investments argued that a December cut would support credit markets, while a steadier Fed stance—signaling comfort with holding policy for several meetings—would help maintain dollar stability. Analysts also warned that a more dovish message, such as leaving the door open for a January cut, could weaken the dollar and steepen the Treasury curve.

FX Markets Hold Steady as Traders Await the Fed’s Next Move

Cross-currency flows were restrained on Tuesday as traders refrained from heavy positioning before the Fed announcement. Commerzbank noted that participants are avoiding large FX adjustments, which leaves the DXY driven primarily by U.S. rates and expectations rather than broad foreign-currency pressure.

Steady Treasury Yields Keep Dollar Support Intact

Risk appetite remained controlled, with U.S. yields holding in a tight range. Incremental gains in benchmark maturities helped the dollar recover intraday, reinforcing the index’s push toward longer-term averages. If yields remain steady while the Fed confirms a measured pace of easing, the DXY is likely to stay supported.

Technical Picture Points to a Potential Breakout for the Dollar

The DXY now trades between the 50-day MA at 99.197 and the 200-day MA at 99.439, with the narrowing spread signaling that a larger move may be developing. Traders identify 99.580 as the immediate pivot; failure to clear this level would stall the rally. A break above the 200-day MA would signal constructive momentum toward 100.000–100.395. If the index falls back under the 50-day MA, a test of the swing bottom at 98.765 becomes likely, opening risk toward 98.307–97.814.

Dollar Traders Brace for Volatility with 50- and 200-Day MAs in Play

Given firmer yields and the index’s recovery toward key averages, the short-term outlook leans cautiously bullish, with traders watching whether the DXY can force a clean break through 99.580. A move through that pivot would confirm that buyers still control the market and open room for an extension toward the next upside zone.

If Powell avoids signaling urgency for faster easing, rate expectations should continue to offer support. However, failure at the pivot or any pullback under the 50-day moving average would quickly shift control back to sellers and put the recent rebound at risk. For now, the balance of factors favors further upside as long as buyers defend the reclaimed levels and keep pressure on the 200-day moving average.

More Information in our Economic Calendar.